Exam 17: Understanding Corporate Annual Reports: Basic Financial Statements

Below is the balance sheet for Triple H Company: $\text { Triple H Company Balance Sheet December 31, }$ 20X6 20X5 Current assets: Cash \ 380 \ 242 Accounts receivable 430 194 Inventory 238 388 Prep aid insurance Total current ass ets \ 1,080 \ 900 Long-term assets: Fixed ass ets \ 406 \ 452 Less: Accumulated depreciation Total long- term assets \ 134 \ 224 Total assets \ 1.124 Current liabilities: Accounts payable \ 176 \ 152 Wages payable 38 32 Total current liabilities \ 184 \1 84 Long-term liabilities: Notes payable Total liabilities \ 634 \ 604 Owners' equity: Common stock \ 190 \ 160 Retained income Total owners' equity \ 580 \ 520 Total liabilities and owners' \ 1,214 \ 1,124 equity What issue would be of most concern or source of optimism on behalf of financial analysts of Triple H Company?

On January 1, 20X6, Rivers Company acquired 80% of the outstanding shares of common stock of Joan Company for $72. During 20X6, Joan Company had net income of $10, and Rivers Company had net income of $40. None of the net income for either company was the result of intercompany sales. All net income for both companies is in the form of cash. Prepare the following: a. The consolidated balance sheet immediately after the acquisition b. The elimination entry necessary on December 31, 20X6 c. The consolidated balance sheet at December 31, 20X6

Mel Company holds a minority interest in Gibson Company. Mel Company owns of Gibson Company's stock.

The current cost/nominal dollars method adjusts historical costs using:

Comparing a company's ratio with the company's own historical ratios is called a(n):

Inflation is defined as:

On January 1, 20X6, Jane Company acquired 80% of the outstanding shares of Tarzan Company for $152 in cash. Tarzan Company's total assets and total liabilities were $450 and $260, respectively. The balance of the minority interest on the consolidated balance sheet immediately after the acquisition of Tarzan Company's stock is:

Orlando Company acquired all of the shares of Tampa Company for $100. The fair values of Tampa Company's assets and liabilities at the time of acquisition were $200 and $120, respectively. On the consolidated balance sheet of Orlando Company, goodwill is:

Vince Company purchased as a long- term investment common stock of Gill Company. During the current year Gill Company earned $4,000,000 and paid dividends of $1,000,000. Assume that Vince Company owns 30% of Gill Company. The dividend paid by Gill Company will affect Vince Company by:

Historical cost/nominal dollars is the traditional method of measuring income.

Debt is often a more attractive vehicle for financing long- term investments than issuing more stock for which of the following reasons? 1. Debt is less risky than common stock. 2) Debt is not traded on exchanges. 3) Interest payments are tax deductible and dividend payments are not. 4) Ownership rights are kept by the present stockholders.

Since research indicates that investors are apparently not fooled by the format of the information, accounting regulators should focus on disclosure issues.

Concepts of income and capital include all of the following except:

Net income / sales

Which of the following statements with respect to an efficient capital market is incorrect?

are investments that are not intended for resale in the near future.

Comparisons of a company's financial ratios with ratios of similar companies or with industry averages for the same period

The parent- subsidiary relationship requires special accounting treatment.

Brian Company purchased, as a long- term investment, 40% of the outstanding shares of Wilson Company. At the end of the year the market value of the shares had increased. The increase in market value of Wilson Company shares will affect Brian Company by:

Comparing a company's ratios with the ratios of other companies in the same industry is called a(n):